Sky's the limit
I have a meeting with Sky scheduled for this Thursday, with a view to taking up formal coverage. My impression is that most of the people covering the company currently come from the media sector (which is a real mess in terms of the rather ham-fisted industry classifications under the 18 sectors in DJ STOXX 600), and I'm looking forward to throwing some telecoms/internet questions at them and seeing what comes back. I'm particularly interested to see if they have any market share assumptions for TV-over-DSL and overall how much of a credible threat they (claim to) believe it to be. Among the many questions I have for them, the most interesting to me are: since BT is apparently about to declare war on Sky with the mooted Freeview tie-up, a) is there a telephony strategy afoot (clarification - I should have added "beyond the legacy SkyTalk carrier pre-selection product, which has c.350k users"); and b) what are the chances that we will see Sky enter the broadband market in the not-too-distant-future?
I VERY STRONGLY believe the answer to the telephony question is "yes," though I will be interested to hear the company line on this, and I believe the answer to broadband must also be that it is a natural defensive move. I eventually envisage some sort of Sky+ "turbocharged" edition PVR, with ADSL modem embedded. Clearly there may be some sensitivities around cannibalization of the DTH product from a broadband platform, but it is also interesting to contemplate how the business model might evolve, particularly in light of moves by Murdoch stablemate NDS in the area of DRM for IP TV(http://www.nds.com/newspdfs/VGS_100904.pdf) and for content distribution more generally (http://www.nds.com/newspdfs/SVP_Alliance_100904.pdf).
We should not underestimate what a telephony/broadband challenge from Sky might mean for BT Group. A concerted push by Sky into telephony would mean that 7m digital TV homes (which are contractually obliged to have their set-top boxes connected to a PSTN line) would be candidates for a bundled offer from Sky - that's nearly three times the size of the total digital cable footprint in the UK. And given the success that the two UK cable companies have had in bundling services (90% uptake of telephony services, 22% triple play penetration, on average in Q2), this is even more interesting, or conversely worrying, if you're a telco.